Congress Avoids the Fiscal Cliff
The Senate and the House have passed a last minute budget deal worked out between President Barack Obama and congressional Republicans averting the so-called fiscal cliff.
Details are still sketchy, but here are some highlights of the compromise bill as provided by unofficial sources:
- Keep the current tax rates in place for individuals making less than $400,000. For incomes above $400,000 ($450,000 for married taxpayers, $425,000 for heads of household). Incomes above these levels will be taxed at 39.6%.
- Raise the capital gains rates from 15% to 20% for taxpayers in the 39.6% bracket.
- Qualified dividends will continue to be taxed at capital gains rates.
- The estate tax rate will rise to 40% (up from 35%) with an exemption of $5 million.
- Provides a one-year extension of unemployment benefits.
- A two month delay on the automatic spending cuts.
- Tax credits established under President Obama's economic recovery program will be extended for 5 years.
- The American Opportunity Tax Credit (tuition credit) is extended for 5 years.
- The alternative minimum tax (AMT) has been made permanent with the exemption inflation adjusted in future years.
- Phases out itemized deductions and personal exemptions for households making more than certain amounts.
- Extends a host of individual provisions, including the treatment of mortgage insurance premiums as qualified residence interest, deductions for State and local general sales taxes, and the above-the-line deduction for qualified tuition and related expenses.
- Extends key business tax breaks including depreciation provisions including bonus depreciation, and the research and work opportunity tax credits.
- An extension of the 2% payroll tax deduction was not included in the legislation.
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